Wisconsin Mortgage Loans: Considering More than Interest Rates

By Karen Lawson
Local Lender Columnist
Oct 8, 2007
Mortgage lenders have developed many types of home loans to meet the needs of potential new and existing homeowners. If you're looking for a new home loan, or want to refinance your mortgage, it's a good idea to review all of the terms of any home loan you're considering. Adjustable interest rates can help you buy a larger home, or add cash flow to your monthly budget, but "exotic" terms such as negative amortization can cause problems if you don't understand how they work.

Understanding "Exotic" Mortgage Terms

It can be tempting to choose a home loan based on interest rates alone. A low interest loan with negative amortization will add to the original amount of your mortgage loan. Negative amortization means that you may pay a very low interest rate, or only a part of what a fully amortized payment would be. The unpaid amount of each payment is added to your mortgage balance. This can work against you if Wisconsin property values experience significant declines.

Adjustable rate mortgage loans often adjust based on financial indexes that can fluctuate. If you're getting an adjustable rate mortgage, ask your lender to explain exactly how much payments can increase. Interest rate "caps," or limits on how much payments can adjust, can provide some protection, but it's best to know in advance how your payments can potentially increase.

Mortgage lenders should be able to clearly explain all terms of home loan they're offering. It's a good idea to carefully review mortgage documents before signing. If you have questions or concerns, it may be worthwhile to consult a financial advisor for guidance.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.